阅文集团(00772) - 2023 - 中期业绩

Financial Performance Summary Financial Performance Summary In the first half of 2023, the company's revenue decreased by 19.7% year-on-year to RMB 3.28 billion, and gross profit fell by 25.2%, while operating profit and profit attributable to equity holders increased significantly by 23.8% and 64.8% respectively, with non-IFRS profit attributable to equity holders seeing a slight decrease of 9.4% H1 2023 Financial Highlights (Unaudited) | Financial Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | (19.7) | | Gross Profit | 1,604,762 | 2,146,326 | (25.2) | | Operating Profit | 310,948 | 251,209 | 23.8 | | Profit Before Income Tax | 425,589 | 340,436 | 25.0 | | Profit for the Period | 375,979 | 232,276 | 61.9 | | Profit Attributable to Equity Holders | 376,680 | 228,545 | 64.8 | | Non-IFRS Profit Attributable to Equity Holders | 603,119 | 665,995 | (9.4) | Business Review and Outlook Overview The company has proposed an "IP upgrade strategy" focusing on the full lifecycle development of IPs, emphasizing quality and efficiency, viewing AI, particularly AIGC, as a core engine for future growth, aiming to build a multi-modal content platform and an integrated IP ecosystem, supported by a restructured organization and the launch of "Yuewen Miaobi" - The company has established a new vision and mission: "Let good stories live on" (讓好故事生生不息), shifting its strategic focus to creating high-quality, enduring IPs[3] - AIGC is identified as the new engine to drive quality and efficiency in the IP ecosystem, enabling a multi-modal content platform and an integrated upstream-downstream IP system[4] - The company restructured into four business units to better integrate content, platforms, and film/television production, and to advance AI technology development and application[4] - In July, the company launched "Yuewen Miaobi," the online literature industry's first large language model, and its application "Writer's Assistant Miaobi Version," marking its first step in embracing AIGC to empower the creative ecosystem[5] H1 2023 Business Highlights In H1 2023, the company strengthened its content ecosystem, with significant growth in high-quality works and an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million, while advancing IP visualization with popular TV series and IP commercialization through derivative products and game adaptations, and expanding its overseas platform WebNovel with approximately 3,200 translated Chinese works and 560,000 local original works IP Creation The online reading platform saw the addition of approximately 200,000 new writers and 350,000 new novels, with the number of new works with an average subscription per chapter exceeding 10,000 growing by over 120% YoY, contributing to an 8.6% YoY increase in Monthly Paying Users (MPU) to 8.8 million - In H1 2023, the platform added ~200,000 writers and ~350,000 novels, with over 19.5 billion new words[6] - The number of new works with an average subscription per chapter of over 10,000 increased by more than 120% YoY[6] - Monthly Paying Users (MPU) grew by 8.6% YoY and 12.8% sequentially to 8.8 million[6] IP Visualization The company successfully launched several high-quality visual adaptations, including the TV series "The Ordinary Road" (平凡之路) and "Turn on the Right Way of Life" (縱有疾風起) which achieved top viewership ratings, and maintained high popularity for animation sequels like "Stellar Transformations" (星辰變), while comics such as "The Guardian of the Great Feng" (大奉打更人) were well-received - The TV series "The Ordinary Road" (平凡之路) ranked first on Tencent Video's drama chart for 16 consecutive days and topped multiple third-party data platforms[7] - The second season of the annualized animation "Battle Through the Heavens" (斗破蒼穹) was launched, consistently ranking in the top three on Tencent Video's animation channel[8] IP Commercialization and Monetization The company advanced its IP commercialization through derivatives and gaming, launching proprietary blind boxes for popular IPs like "Lord of the Mysteries" (詭秘之主) and "Battle Through the Heavens" (斗破蒼穹), and successfully launching licensed games based on "A Record of a Mortal's Journey to Immortality" (凡人修仙傳) and "Swallowed Star" (吞噬星空), while updating the self-operated game "New Douluo Dalu" (新斗羅大陸) - Launched proprietary blind boxes for key IPs such as "Lord of the Mysteries" and "Battle Through the Heavens"[9] - Licensed games "A Record of a Mortal's Journey to Immortality" and "Swallowed Star" were successfully launched in H1 2023[9] Overseas Business As of June 30, 2023, the company's overseas reading platform, WebNovel, offered approximately 3,200 translated Chinese works and around 560,000 local original works to international users, demonstrating continued expansion in the global market - WebNovel provided overseas users with approximately 3,200 translated Chinese works and 560,000 local original works[10] Management Discussion and Analysis Financial Performance Comparison (H1 2023 vs H1 2022) Revenue for H1 2023 decreased by 19.7% YoY to RMB 3.28 billion, primarily due to a 30.1% decline in copyright operation revenue from fewer film/TV projects and an 11.6% fall in online business revenue due to reduced marketing spend and channel optimization, resulting in a gross margin drop from 52.5% to 48.9%, yet operating profit grew 23.8% to RMB 310.9 million, driven by a 26.0% reduction in sales and marketing expenses and a significant positive swing in 'Other gains/(losses), net' Revenue Total revenue decreased 19.7% YoY to RMB 3.28 billion, with online business revenue falling 11.6% to RMB 2.04 billion due to strategic reductions in marketing spend and channel optimization, and copyright operation and other revenue dropping 30.1% to RMB 1.24 billion primarily because fewer film and TV projects were launched, while Average Monthly Active Users (MAU) decreased by 20.0% to 211.7 million, Average Monthly Paying Users (MPU) increased by 8.6% to 8.8 million, and Average Monthly Revenue Per Paying User (ARPPU) declined by 14.2% to RMB 33.3 Revenue Breakdown by Segment (RMB '000) | Segment | H1 2023 | % of Total | H1 2022 | % of Total | | :--- | :--- | :--- | :--- | :--- | | Online Business | 2,038,736 | 62.1% | 2,307,016 | 56.4% | | - Own Platform Products | 1,763,999 | 53.7% | 1,763,077 | 43.1% | | - Tencent Products Channel | 177,008 | 5.4% | 347,482 | 8.5% | | - Third-party Platforms | 97,729 | 3.0% | 196,457 | 4.8% | | Copyright Operation & Other | 1,244,290 | 37.9% | 1,780,198 | 43.6% | | - Copyright Operation | 1,190,119 | 36.3% | 1,731,258 | 42.4% | | - Other | 54,171 | 1.6% | 48,940 | 1.2% | | Total Revenue | 3,283,026 | 100.0% | 4,087,214 | 100.0% | Key Operating Data | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Average MAU (million) | 211.7 | 264.7 | | Average MPU (million) | 8.8 | 8.1 | | ARPPU (RMB) | 33.3 | 38.8 | - The decrease in online business revenue from Tencent and third-party channels was mainly due to optimizing distribution channels and discontinuing cooperation with certain partners[13] - The decrease in copyright operation revenue was mainly due to fewer TV series, web series, and films launched in H1 2023 compared to H1 2022[15] Cost of Revenue, Gross Profit, and Gross Margin Cost of revenue decreased by 13.5% YoY to RMB 1.68 billion, primarily due to lower production costs for film and TV series in line with reduced revenue, and decreased platform distribution costs, yet gross profit fell by 25.2% to RMB 1.60 billion, and the gross margin contracted to 48.9% from 52.5% in the prior year period Cost of Revenue Breakdown (RMB '000) | Cost Component | H1 2023 | % of Revenue | H1 2022 | % of Revenue | | :--- | :--- | :--- | :--- | :--- | | Content costs | 751,939 | 22.9% | 743,142 | 18.2% | | Platform distribution costs | 383,224 | 11.7% | 475,040 | 11.6% | | Production costs of TV/web series, animations and films | 268,714 | 8.2% | 451,389 | 11.0% | | Amortization of intangible assets | 74,989 | 2.3% | 102,106 | 2.5% | | Total Cost of Revenue | 1,678,264 | 51.1% | 1,940,888 | 47.5% | - Gross profit decreased by 25.2% YoY to RMB 1,604.8 million. Gross margin was 48.9% in H1 2023, compared to 52.5% in H1 2022[17] Operating Expenses and Profitability Operating profit increased by 23.8% YoY to RMB 310.9 million, mainly driven by a 26.0% reduction in sales and marketing expenses to RMB 822.1 million due to cost-saving initiatives and fewer film/TV projects, a 4.1% decrease in general and administrative expenses, and a significant positive swing in other net gains, resulting in profit attributable to equity holders growing by 64.8% to RMB 376.7 million - Sales and marketing expenses decreased by 26.0% YoY to RMB 822.1 million, primarily due to reduced promotion and advertising expenses for the online business and fewer film/TV projects[19] - General and administrative expenses decreased by 4.1% YoY to RMB 534.5 million, mainly due to lower employee benefit expenses[19] - The company recorded other net gains of RMB 5.8 million, compared to other net losses of RMB 235.4 million in H1 2022, mainly due to the absence of fair value losses on certain investments recorded in the prior year[18] - As a result of the above factors, operating profit increased by 23.8% YoY to RMB 310.9 million[19] Segment Information The Online Business segment's revenue decreased by 11.6% to RMB 2.04 billion, with its gross margin remaining stable at 50.0%, while the Copyright Operation and Other segment's revenue saw a larger decline of 30.1% to RMB 1.24 billion, and its gross margin fell significantly from 55.4% in H1 2022 to 47.0% in H1 2023, reflecting the impact of fewer high-margin film and TV projects Segment Performance (H1 2023 vs H1 2022) | Segment | H1 2023 Revenue (RMB '000) | H1 2023 Gross Profit (RMB '000) | H1 2023 Gross Margin (%) | H1 2022 Revenue (RMB '000) | H1 2022 Gross Profit (RMB '000) | H1 2022 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Online Business | 2,038,736 | 1,020,014 | 50.0% | 2,307,016 | 1,160,271 | 50.3% | | Copyright Operation & Other | 1,244,290 | 584,748 | 47.0% | 1,780,198 | 986,055 | 55.4% | | Total | 3,283,026 | 1,604,762 | 48.9% | 4,087,214 | 2,146,326 | 52.5% | Other Financial Information & Non-IFRS Measures Adjusted EBITDA decreased to RMB 471.4 million from RMB 745.1 million in H1 2022, with the adjusted EBITDA margin falling from 18.2% to 14.4%, and Non-IFRS profit attributable to equity holders was RMB 603.1 million, down from RMB 666.0 million, as the company provides these non-IFRS measures, which exclude items like share-based compensation and investment-related gains/losses, to offer a clearer view of its core operational performance Other Financial Data | Metric | H1 2023 (RMB '000) | H1 2022 (RMB '000) | | :--- | :--- | :--- | | EBITDA | 372,213 | 600,560 | | Adjusted EBITDA | 471,354 | 745,058 | | Adjusted EBITDA Margin | 14.4% | 18.2% | | Net Cash | 7,541,645 | 6,555,723 | | Capital Expenditures | 99,296 | 136,603 | Reconciliation of IFRS to Non-IFRS Profit (Attributable to Equity Holders) | (RMB '000) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Reported Profit | 376,680 | 228,545 | | Share-based compensation | 70,892 | 116,659 | | Net loss from investments and acquisitions | 147,219 | 305,897 | | Amortization of intangible assets from acquisitions | 10,085 | 20,059 | | Tax effects | (1,757) | (5,165) | | Non-IFRS Profit | 603,119 | 665,995 | Capital Structure, Liquidity and Financial Resources The Group maintained a strong and healthy financial position, with net cash increasing to RMB 7.54 billion as of June 30, 2023, the asset-liability ratio decreasing to 17.0%, the current ratio improving to 361.6%, a zero gearing ratio with no outstanding borrowings and RMB 1.77 billion in undrawn banking facilities, and free cash flow for the period of RMB 475.7 million - The asset-liability ratio decreased from 21.0% at year-end 2022 to 17.0% as of June 30, 2023[27] - Net cash increased to RMB 7.54 billion from RMB 7.09 billion at the end of 2022[28] - The gearing ratio was zero, with no borrowings as of June 30, 2023, compared to a 2.3% ratio at year-end 2022[28][29] - Free cash flow for H1 2023 was RMB 475.7 million[28] Employees and Subsidiaries As of June 30, 2023, the Group had approximately 1,720 full-time employees, primarily based in China, and its key subsidiary, New Classics Media (新麗傳媒), which focuses on TV and film production, recorded revenue of RMB 543.6 million and a net profit of RMB 172.0 million attributable to equity holders in H1 2023 - As of June 30, 2023, the Group had approximately 1,720 full-time employees[32] - For H1 2023, subsidiary New Classics Media recorded revenue of RMB 543.6 million and profit attributable to equity holders of RMB 172.0 million[33] Financial Information Consolidated Statement of Comprehensive Income This statement details the Group's revenues, costs, and expenses, leading to a profit for the period of RMB 376.0 million, a 61.9% increase from RMB 232.3 million in H1 2022, primarily driven by lower sales & marketing expenses and a shift from net other losses to net other gains, with basic earnings per share at RMB 0.37, up from RMB 0.23 in the prior year period Condensed Consolidated Statement of Comprehensive Income (RMB '000) | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Revenue | 3,283,026 | 4,087,214 | | Gross Profit | 1,604,762 | 2,146,326 | | Operating Profit | 310,948 | 251,209 | | Profit before income tax | 425,589 | 340,436 | | Profit for the period | 375,979 | 232,276 | | Profit attributable to equity holders | 376,680 | 228,545 | | Total comprehensive income for the period | 447,241 | 343,137 | - Basic earnings per share was RMB 0.37, compared to RMB 0.23 in H1 2022. Diluted earnings per share was RMB 0.37, compared to RMB 0.22 in H1 2022[36] Consolidated Statement of Financial Position As of June 30, 2023, the Group's total assets stood at RMB 22.37 billion, a slight decrease from RMB 22.73 billion at year-end 2022, while total liabilities decreased to RMB 3.81 billion from RMB 4.78 billion, consequently increasing total equity to RMB 18.56 billion, with key assets including RMB 7.41 billion in intangible assets (mainly goodwill) and a strong cash and deposits position Condensed Balance Sheet - Assets (RMB '000) | Asset Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Non-current Assets | 10,790,143 | 10,258,566 | | Intangible assets | 7,413,232 | 7,421,639 | | Investments in associates and joint ventures | 1,112,888 | 1,008,754 | | Current Assets | 11,583,942 | 12,475,912 | | Cash and cash equivalents | 3,359,906 | 5,545,766 | | Term deposits | 913,947 | 1,848,660 | | Trade receivables and notes | 1,820,841 | 2,048,930 | | Total Assets | 22,374,085 | 22,734,478 | Condensed Balance Sheet - Equity & Liabilities (RMB '000) | Equity & Liability Category | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Equity | 18,563,573 | 17,954,722 | | Non-current Liabilities | 606,912 | 796,000 | | Current Liabilities | 3,203,600 | 3,983,756 | | Borrowings | – | 417,876 | | Trade payables | 1,032,440 | 1,203,873 | | Total Liabilities | 3,810,512 | 4,779,756 | | Total Equity and Liabilities | 22,374,085 | 22,734,478 | Consolidated Statement of Changes in Equity Total equity increased from RMB 17.96 billion at the start of the year to RMB 18.56 billion as of June 30, 2023, primarily driven by the profit for the period (RMB 376.7 million attributable to equity holders) and other comprehensive income of RMB 71.2 million - Total equity attributable to company's equity holders increased from RMB 17,957 million to RMB 18,563 million during H1 2023[40] Consolidated Statement of Cash Flows The Group generated RMB 615.6 million in net cash from operating activities, while net cash used in investing activities was significant at RMB 2.38 billion, largely due to investments in financial assets, and net cash used in financing activities was RMB 466.4 million, mainly for repayment of borrowings, resulting in a net decrease in cash and cash equivalents of RMB 2.23 billion during the period Condensed Consolidated Statement of Cash Flows (RMB '000) | Cash Flow Category | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net cash generated from operating activities | 615,638 | 706,767 | | Net cash (used in)/generated from investing activities | (2,382,543) | 106,106 | | Net cash used in financing activities | (466,370) | (674,036) | | Net (decrease)/increase in cash and cash equivalents | (2,233,275) | 138,837 | | Cash and cash equivalents at beginning of period | 5,545,766 | 4,528,412 | | Cash and cash equivalents at end of period | 3,359,906 | 4,735,717 | Notes to the Interim Financial Information The notes provide detailed breakdowns and explanations for the figures in the primary financial statements, including the definition of operating segments (Online Business and Copyright Operation), a disaggregation of revenue by product line and timing, a breakdown of expenses by nature, and details on intangible assets, primarily goodwill from past acquisitions, also covering share-based payment plans, receivables aging, and other critical accounting policies Note 5: Segment Information The Group's operations are divided into two reportable segments: Online Business (including paid reading, advertising, and game distribution) and Copyright Operation and Other (including production and licensing of film/TV, book sales, and self-operated games), with the Chief Operating Decision-Maker assessing performance based on segment revenue and gross profit - The Group has two reportable segments: Online Business and Copyright Operation and Other[51] - For H1 2023, Tencent was the only customer contributing over 10% of the Group's total revenue[55] Note 10: Earnings Per Share Basic earnings per share (EPS) for H1 2023 was RMB 0.37, calculated based on a net profit of RMB 376.7 million and a weighted average of 1,006.6 million shares, with diluted EPS also at RMB 0.37, considering the potential dilutive effect of restricted share units and share options Basic EPS Calculation | Item | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net profit attributable to equity holders (RMB '000) | 376,680 | 228,545 | | Weighted average number of ordinary shares ('000) | 1,006,602 | 1,011,137 | | Basic EPS (RMB per share) | 0.37 | 0.23 | Note 12: Intangible Assets As of June 30, 2023, the Group's intangible assets had a net book value of RMB 7.41 billion, with the largest component being goodwill, valued at RMB 6.63 billion, allocated to the Online Business (RMB 3.72 billion) and the acquired TV and film business (RMB 2.92 billion), and management concluded that no impairment loss was necessary for the period - Goodwill of RMB 6.63 billion is the largest component of intangible assets[67] - Management performed an impairment test on goodwill related to the acquired TV and film business and concluded no impairment was required for H1 2023[68][69] Note 18: Trade Receivables and Notes Receivable Net trade and notes receivables stood at RMB 1.82 billion, with the aging analysis showing that RMB 952.2 million (approximately 52%) of the net balance is within 3 months, while RMB 727.0 million (approximately 40%) is aged between 6 months and 2 years Aging Analysis of Net Trade and Notes Receivables (RMB '000) | Aging Period | Jun 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Within 3 months | 952,191 | 1,513,045 | | 3 to 6 months | 141,643 | 122,045 | | 6 months to 1 year | 434,227 | 190,646 | | 1 to 2 years | 244,498 | 162,705 | | Over 2 years | 48,282 | 60,489 | | Total | 1,820,841 | 2,048,930 | Other Information Dividend and Corporate Governance The Board of Directors has decided not to declare an interim dividend for the six months ended June 30, 2023, and the company confirms its compliance with all applicable provisions of the Corporate Governance Code and the required standards for securities transactions by directors during the period, with the Audit Committee having reviewed the unaudited interim results and the effectiveness of the risk management and internal control systems - The Board decided not to recommend the payment of an interim dividend for H1 2023[96] - The company has complied with all applicable code provisions of the Corporate Governance Code for the period[97] - The Audit Committee has reviewed the unaudited interim results for H1 2023[98]